13,000 lucky Americans will soon receive letters from the IRS explaining that they’ve been selected for a random audit. The hapless participants are rounded up as part of the IRS’ National Research Program, which seeks to explain why the Treasury receives $300 billion less than we Americans collectively owe. A random audit is nothing to fear unless you are a tax cheating yutz.
Alpha Consumer explains:
You can’t reduce your chances of a random audit. But for audits in general, there’s a lot of stuff you can do.
For a normal tax return, file an accurate return, and most of the time you won’t get audited. Get a reputable return preparer. If someone says, “Don’t worry, you won’t get audited if your expenses are below this amount,” that is probably not someone you want to work with. Keep records. If you have any cash transactions, keep records. If you make a mistake, and you discover it, you can file an amended return before any audit starts. If you make a mistake, it is just that most of the time. But if you go into a return thinking, “Maybe the IRS won’t catch me,” and you don’t report 10 or 20 percent [of your income], that’s not the way to do it if you want to avoid an audit or more than an audit later.
In general, small-business owners and self-employed people have a much larger likelihood of getting audited, because W-2 wage earners have taxes withheld from their returns.
Other “stuff” that may pop you out of a computer and trigger an audit includes a situation where you have $50,000 in income and have reported losses of $100,000, wiping out all the income reported. Or, a taxpayer showing $60,000 in income with a $45,000 mortgage [deduction] may get you an audit.
For those who escaped this round of audits by filing an extension, don’t forget that your tax return is due tomorrow – and don’t forget to claim the telephone excise refund!
How to Avoid Getting Audited by the IRS [Alpha Consumer]
(Photo: AFP/Getty Images)